Zim savings lowest in region

Zim savings lowest in region
Finance and Economic Development Minister, Patrick Chinamasa

Finance and Economic Development Minister, Patrick Chinamasa

ZIMBABWE lags behind its regional peers in terms of savings, Finance and Economic Development Minister, Patrick Chinamasa, has said, urging banks to come up with new products that encourage depositors to save in order to spur economic development.
“The challenge in our economy at the moment is that we are the only country in southern Africa with the lowest savings rate at 10 percent of gross domestic product compared to an average of 30 percent in the region,” he said.
The Treasury boss said it was crucial for financial institutions to introduce products such as paid up permanent shares (PUPS), which allow banks to invest in other sectors of the economy such as the housing market.
PUPS were designed to mobilise private sector funds for housing by enhancing building societies’ competitiveness in attracting deposits.
Zimbabwe has experienced financial sector crises due to macroeconomic challenges that resulted in a number of banks closing.
Consequently, the majority of people lost their savings, which were in the form of life insurance, pension schemes (private), and unit trusts that were denominated in the Zimbabwean dollar.
The introduction of the multiple-currency system in 2009 eroded the benefits accrued by savers who had invested in various financial products resulting in severe mistrust in the country’s financial system.
Statistics from the Finscope Survey (2014) indicate that there is more reliance on informal savings channels by Zimbabwe’s adult population as opposed to formal savings. Only 20 percent of the adult population made use of formal savings channels in 2014, while 23 percent made use of informal channels.
Out of the adult population who do not save, 74 percent indicated lack of disposable income after accounting for living expenses as the main reason for their failure to save, while 21 percent indicated that they had no money to save.
Market experts said in light of the current economic challenges in the economy, it would be prudent for financial service institutions to create new products such as the national savings certificate in the United Kingdom and India to help promote a savings culture.
Central bank governor, John Mangudya, recently introduced a savings bond aimed at encouraging individuals, families, households, small and medium enterprises, schools, universities, public and private institutions, corporates, churches and investors to start saving and build national wealth.
The facility guarantees returns with minimum investment from as little as $100 at no commission, agency or service fees charged.
“The savings bonds will help to accelerate the empowerment of the banking public by providing an investment instrument with high yielding returns as well as offering safe and secure investment. The savings bonds will be made available, through banks, selected agencies and electronically on a platform to be established,” Mangudya said in his mid-term monetary policy statement.
The bonds, which have rolling maturities of between one and five years and a simple interest rate of seven percent, will be accepted as collateral on all borrowings and convertible to cash on a simple open and transparent fixed conversion rate on any trading day.
newsdesk@fingaz.co.zw

Connect With Us

Fingaz Polls

Can Emmerson Mnangagwa revive Zimbabwe's economy?